On Gas Station and Oil Company Profits

[H3.007]

A fitting article for the upcoming travel season (excerpts from SmartMoney.Com; Comments in red by yours truly): What Gas Stations Won't Tell You 1. "Good luck finding the best deal." Most stations are branded — meaning the name of a major oil company hangs out front — and must buy gas from their proprietary company. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the station's competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you. 2. "I hate high gas prices too." Stations earn on average between 10 and 15 cents on a gallon of gas. As fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they can't do anything about — credit card fees, which add up to about 2.5% of all purchases. Last year gas stations' revenue from fuel grew 25%, while the fees they paid to credit card issuers jumped 40%, to $5.3 billion. How do station owners make up for lost revenue? "Prices go up like a rocket and come down like a feather," says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents a gallon before retail prices are lowered to reflect the change. 5. "...and don't even consider applying for our gas card." When it comes to gasoline credit cards, a little research goes a long way. Similar to store cards issued through retailers, gas cards are riddled with drawbacks. APRs are high, starting above 20%; many don't offer rebates on gas purchases. 7. "It's a gallon when I say it's a gallon.It's hard to know if you're getting all the gas you paid for at the pump. The state or county weights-and-measures department usually checks pumps for accuracy, but in some areas it can be years between inspections. In Arizona last year, 30% of the more than 2,000 complaints the state received were valid, and it levied $167,000 in fines. The good news is that it's often easy to catch the most common problem: Older pumps in poor repair may begin charging you for gas before you've pumped it. Check the meter to make sure it registers $0.00 before you begin and doesn't start charging you before the fuel is flowing.
8. "I might gouge you on a soda, but my coffee's a bargain."
With margins on gas taking a hit, stations are increasingly looking to their convenience stores for income. In 2005 gross margins for in-store sales were 30%, while the margin on fuel was 7.2%, according to the National Association of Convenience Stores. Given the stats, you'd assume the average Kwik-E-Mart to be a terrible place to buy just about anything. But that's only partially true. Stock that usually sits on the shelf does tend to be vastly overpriced, so if you forgot ketchup on the way to a barbecue, you can bet you'll pay a lot more for it at a gas station than you would at a supermarket, says David Bishop, director of convenience retailing for Bishop Consulting. What about popular beverages? You'll pay more for a 20-ounce soda at a gas station than you would for a 2-liter bottle in a supermarket; the average price for a liter of water at pumpside marts in 2005 was $1.24, a markup of 55% over wholesale; and energy drinks cost 50% over wholesale, according to Bishop.

Note from sender: As the majority of gas stations’ profits are obviously made on non-fuel items (See #8 above) and gas stations ARE in control of how competitive THEY COULD BE on fuel-related items (See #2 above) while remaining within the letter of the law, consumers can strike back by ceasing all non-fuel related purchases at gas stations. The tactic not only forces gas stations to immediately become aggressively competitive to retain or lure back consumers, but some stations may even become investment liabilities to oil companies. Simply stated, many gas stations are franchises and are dependent upon the owner’s interest and investment to remain open. Imagine the expense the oil companies would have to endure to fund these franchises after franchise owners liquidate their properties and oil companies require outlets to sell their unjustifiably priced product. The loss of such investors would certainly garner the attention of the purveyors of corporate greed mush faster than the half-hearted, government investigations conducted by officials whom, in all likelihood, have their fuel expenses paid by the taxpayer and thus haven’t a clue as to what a true financial disruption high fuel prices mean for the taxpayer (Starting to feel like there is more than one perpetrator here folks? Also note that approximately 20% of fuel costs are “taxes”…..) . So when you need to make your next trip for gas, remember to “pass” on the candy, the tobacco, the soda, and the sandwiches, and always remember to return the favor of high priced gas to station owners even further – by paying with a credit card (costing them more money and while potentially rewarding you with perks a la #5). Be particularly mindful of this during the upcoming Memorial Day, Fourth of July, and Labor Day weekends – weekends that provide much profit for all of those “oil company-related individuals” who claim that they have “no control or responsibility” over the situation. And the faster and more widespread the word gets around, the more effective the tactic Keep this up until gas returns to around $1 to $1.50 per gallon – for high grade

[Huck BB62]

Well, how much of what this article says is true, I don't know but I do know one item is total BS. The article that says that they station has to buy propietory gasoline. That's simply inaccurate. The gas comes from the same danged storage tanks. There's a cardlock additive dispenser for each delivery and even that completely depends on the diligence of the driver and worker at the tank farm. Heck they don't even PUT additives in it sometimes when they screw up or get lazy.

This is the truth as told to me by my buddy that worked the tank farm in our area for five years.

Now you know.

If you want to be mad, be mad at the facts.

Oil in the states cost between $4 and $6.50 a gallon to get out of the ground. This is called "lifting costs". Anyone tells you different, they're a corporate whore liar. I've been in budget meetings and we've shut down power plants at the price point. Back in the late '80s, I saw bumper stickers in our area that said "Please God, give me one more oil boom, we promise not to waste it." They frickin' meant it. During the '70s embargo around here, oh my God, it was sin city. Money flowed allllllll over this town. Now, it goes one place, straight up. The oilfield I work in used to talk about astronomical profits at $20 a barrel!!!!!! They don't EVEN DISCUSS it now. I'm serious, it's a hush hush secret. They don't make trucks big enough for the amount of cash the oilfield I work in the middle of makes (the company begins with a C) They got rid of all their employees that they could. There wasn't enough profits for company owned oil rigs or repair people. NOOOoooo, that's all done by contractors now, on the margin.

Where the workers around here used to be people with defined benefit plans, medical, retirement. Now they're all poor schmucks that work for the contractors with minimal benefits. Nice huh? Billions and billions of dollars of profits and they complain about how expensive it is to give employees medical, and how much it's going up. (don't get me started on how the illegals are killing the hospitals in our area by using the ERs as a clinic)

Billions and billions of record profits and the news right now is that gas is expensive because of lack of refinery capacity. No new refineries have been built since the '70s (don't get me started on how the EPA greenie a-holes have made this and nuke plants very unlikely) With billions of dollars flowing for the record profits, perhaps BP could hose a little of that into a new refinery or two instead of puking ad dollars telling us how "Green" they are? NOOOOooooooo.

But still, we all drive like idiots with our foot planted firmly on the floorboard. I'm guilty too, so don't take it as an insult.

They're charging us precisely what we're willing to pay. No more, no less.

I've seen the enemy, they iz us.

[AfroCreame]

Hey..all we need to bring gas prices down is a election. Funny the decrease that happened in last years election..now look. When prices are high in winter they say it's because of heating oil...they'll come back down..spring...then summer..well it went back up because of demand. It's truly about screwing you just enough to keep you bitching but willing to pay. Can we say the sweet spot? Break the oil companies up.

[H3.007]

I am no expert and I certainly appreciate the feedback, debate, and education. The only thing that I wrote was the portion in red - again, the rest was from Smart Money Magazine (I urge you to read the entire article as I could only post portions of the original due to byte limitations here). And I am wise enough to not bet all my chips on one source but much of what the article states does make sense.

I really feel for you and your bretheren oil workers Huck. I can certainly see how cutting the working man out of the equation only increases the wallet size of these robber barons.

We are, to some degree, responsible but we must no longer remain responsible for the apathetic attitudes that have allowed such gouging. If we all can see the seasonal trends, why is it beyond the comprehension of the experts?

It isn't - and that is why we must put a stop to it through an legitimate means we can.... Afro makes a very, very good point there.

Interesting side note on the hospitals Huck. We don't have the illegals, at least to the extent you likely do, here in PA. Yet, the physician's offices are double booked and they now tell people to go to the ER for something as relatively benign as an upper respiratory infection. I know, it happened to me. I think the hospital issue is a combination of unethical physician practices as well as a failure of immigration policies and the enforcement of citizen patients' rights.

Fight the Power!!

[usetosellhummer]

My old country doc has to 40 people a day to make any money (HMO sets what they will pay and he has to eat it. This country is sliding into a dangerous area that I see only two ways out. 1. Jesus is comming back.
2. serious resession with a big political upheaveal. ??? who knows. I will be cutting back on Dish TV, vacation plans and we already put off the purchase of a new tv and fridge becasue of the extra $200 a month in fuel costs (we HAVE to comute) When Wal Mart sings the blues and people quit spending money, things will happen.

[usetosellhummer]

wow I like it!

[rob85635]

Not long ago, a month or two or three, I was working at my part time job (I think that is where I heard the story). An illegal alien, OH MY, please excuse me... I meant to say "Undocumented Immigrant". You can't call them illegal aliens anymore. Anyway, a person from Mexico came across the border close to where I live (I live less than 25 miles from the Mexican border as the bird flies) this poor person fell down a ravine/cliff while simply trying to come to American illegally to help us Americans who won't take low paying jobs. Heck, he is just doing us a favor by breaking the law.

Please forgive me, I digress... After falling he became seriously injured and required evacuation to a trauma center in Tucson I believe. He had severe head injuries. The story I was told was that he was on his third, YES THIRD, brain surgery.

Guess who is paying for this.???? YOU AND I are. I hate the price of gas, overbloated fat cat oil companies. I hate illegal aliens worse. I have personally seen what can happen. If you are interested in that story let me know and I will rant about that. I work part time as a police dispatcher and police patrol volunteer. I have over 17 years of volunteer and part time paid experience with our local police department. I speak from experience and I tell it like I see it.

How much do you think 3 brain surgeries cost? Think about it.

Rob

[RubHer Yellow Ducky]

[quote=rob85635]Not long ago, a month or two or three, I was working at my part time job (I think that is where I heard the story). An illegal alien, OH MY, please excuse me... I meant to say "Undocumented Immigrant". You can't call them illegal aliens anymore. Anyway, a person from Mexico came across the border close to where I live (I live less than 25 miles from the Mexican border as the bird flies) this poor person fell down a ravine/cliff while simply trying to come to American illegally to help us Americans who won't take low paying jobs. Heck, he is just doing us a favor by breaking the law.

Please forgive me, I digress... After falling he became seriously injured and required evacuation to a trauma center in Tucson I believe. He had severe head injuries. The story I was told was that he was on his third, YES THIRD, brain surgery.

Guess who is paying for this.???? YOU AND I are. I hate the price of gas, overbloated fat cat oil companies. I hate illegal aliens worse. I have personally seen what can happen. If you are interested in that story let me know and I will rant about that. I work part time as a police dispatcher and police patrol volunteer. I have over 17 years of volunteer and part time paid experience with our local police department. I speak from experience and I tell it like I see it.

How much do you think 3 brain surgeries cost? Think about it.

TOO MUCH !!!

After the 1st one they should have put him on a chopper and leave him at the closest large mexican airport.

I feel sorry for people who get hurt looking for a better life but this country is slipping back and I don't want IT (the U.S. of A.) to fall into ANY revine...